M/S Yamuna Expressway Industrial Development Authority Vs Deputy Commissioner Of Income Tax

1. Heard Sri Balbir Singh learned Senior Advocate assisted by Sri Abhinav Mehrotra and Ms. Rubal Maini, Advocates for petitioner and Sri Ashok Mehta, Sri Gaurav Mahajan, and Sri Manu Ghildiyal, Advocates for respondent.

2. In all these writ petitions, petitioner M/s Yamuna Expressway Industrial Development Authority (hereinafter referred to as "YEIDA") has challenged reassessment proceedings and notice issued under Section 148 of Income Tax Act, 1961 (hereinafter referred to as ''''Act 1961'') on the ground that said proceedings are patently illegal and without jurisdiction, since conditions precedent to justify re-assessment proceedings do not exist and authorities are proceeding without application of mind.

3. Details of relevant Assessment Year (hereinafter referred to as "A.Y.) in respective writ petitions and date of notice etc. are stated as herein:-

4. Basic facts are common. As agreed by learned counsel for parties, we have taken up Writ (Tax) no. 682 of 2016 and Writ (Tax) no. 182 of 2016 as leading cases for the purpose of referring pleadings therefrom. Parties also agreed that though counter affidavit has been filed only in three cases i.e. Writ Tax no. 182 of 2016, Writ Tax no. 183 of 2016 and Writ Tax no. 184 of 2016, but pleadings therein may be read in remaining two writ petitions.

5. By notification dated 24.04.2001, issued under Section (3) of Uttar Pradesh Industrial Development Act, 1976 (hereinafter referred to as ''''UPIDA, 1976''), a statutory body namely "Taj Expressway Industrial Development Authority" was constituted. Subsequently, title of body was changed by notification dated 11.07.2008, as "Yamuna Expressway Industrial Development Authority" (i.e. "YEIDA"), issued under Section 3 read with Section 2(d) of UPIDA, 1976.

6. UPIDA, 1976 is a statute enacted to provide for constitution of an Authority for development of certain areas in State of U.P. into industrial and urban townships and for matters connected therewith.

7. Petitioner YEIDA, did not file Income Tax Returns after its constitution. For A.Ys. 2009-10 to 2013-14, Deputy Commissioner of Income Tax, Circle 3, NOIDA (hereinafter referred to as "DCIT") issued notice dated 07.08.2014, in similar terms, requiring YEIDA to prepare true and correct Returns of its income for above A.Ys., for which it was assessable under Act 1961. It informed YEIDA that Returns should be in appropriate form, as prescribed in Rule 12 of Income Tax Rules, 1962 (hereinafter referred to as "Rules 1962"). Notices dated 07.08.2014, issued separately in respect to all the aforesaid A.Ys. though worded similarly and mention that same is being issued under Section 142(1) of Act 1961. Pursuant thereto YEIDA filed Returns in prescribed form. In all the Returns, most columns were either left blank mentioning ''''Not applicable'' or ''''Nil'' or some documents were attached and mentioned ''''Attached with separate sheets''. In the documents filed as computation of income, along with Returns, YEIDA declared its income and taxable liability in respect to relevant years, as under:-

8. In respect to A.Ys. 2010-11, 2011-12, 2012-13, 2013-14, DCIT sent letters dated 30.11.2015, under Section 148 of Act 1961 requiring YEIDA to submit returns again for the aforesaid A.Ys. A similar letter in respect to A.Y. 2009-10 was issued by DCIT under Section 148 on 29.03.2016. In respect to all A.Ys. except A.Y. 2009-10, YEIDA submitted a common letter dated 14.12.2015 requesting DCIT to treat Returns of Income, previously filed by it, towards compliance of notice under Section 148 of Act 1961. Similar letter in respect to A.Y. 2009-10 was submitted by YEIDA on 28.04.2016. DCIT then sent letters/notices dated 16.12.2015 under Section 143(2)/142(1), similarly worded in respect to all A.Ys. except A.Y. 2009-10 enclosing questionnaire.

9. Since reasons for issuing notice under Section 148 of Act 1961 were not communicated to YEIDA, DCIT, subsequently, on an application submitted by YEIDA, communicated "reasons for believe" that Income has Escaped Assessment. The reasons appended as ''''Annexure-A'' show date mentioned by DCIT was 20.11.2015 but communicated to YEIDA along with letters dated 16.12.2015 referring to YEIDA''s application dated 14.12.2015.

10. The aforesaid letters dated 20.11.2015, containing reasons for the purpose of Section 147/148 of Act 1961, are almost similarly worded in respect to all A.Y.''s except A.Y. 2009-10. Five paragraphs in all four letters except for A.Y. 2012-13 where it had six paragraphs. In order to show similarity of reasons given in all letters, Para 5 in respect to A.Y.''s 2010-11, 2011-12, 2013-14 and Para 5 and 6 in respect to A.Y. 2012-13 are reproduced as under:-

A.Y. 2010-11

5. "On perusal of Income and Expenditure A/c and Balance sheet for A.Y. 2010-11 it is seen that the assessee has debited expenses totalling Rs. 59,41,73,401/- and shown income of Rs. 55,52,71,837/- only resulting in deficit of Rs. 3,89,01,564/- for the A.Y. 2010-11. On further examination the following issue emerges:-

(i) As per Income and Expenditure Account for A.Y. 2010-11. the Assessee has debited Rs. 49,59,19,544/- towards "interest paid on loan". The assessee is liable to deduct TDS on payment of interest u/s as 194A of I.T. Act,1961. However ACIT(TDS) has informed that no TDS has been deducted u/s 194A of I.T. Act, 1961 the assessee for the relevant previous year. Hence this payment is to be disallowed u/s 40(a)(ia) of I.T. Act.

(ii) Advertisement expenses of Rs. 2,31,65,429/- this year compared to Rs. 1,47,64,131/- last year. If the same was executed through contract, TDS is deductible u/s 194C of the I.T. Act, 1961. If no TDS was deducted and paid the expenses are liable to be disallowed 40(a)(ia). The same needs to be verified.

(iii) Consultancy Expenses of Rs. 4,85,36,284/- this year compared to Rs. 22,35,504/- last year. The same is liable for TDS u/s 194J of the I.T. Act, 1961. If no TDS was deducted and paid the expenses are liable to be disallowed 40(a)(ia). The same needs to be verified.

(iv) The sundry creditors have decreased to Rs. 2827.83 Crores as compared to 798.77 crores last year which needs verification.

(v) The assessee has claimed depreciation on electrical equipment @ 15% instead of 10% during the relevant previous year which is prima facie inadmissible."

A.Y. 2011-12

5. "On perusal of Income and Expenditure A/c and Balance sheet for A.Y. 2011-12 it is seen that the assessee has debited expenses totalling Rs. 2,24,04,18,556/- and shown income of Rs. 131,88,26,660/- only resulting in deficit of Rs. 92,15,91,896/- for the A.Y. 2011-12. On further examination the following issue emerges:-

(i) The Assessee has not deducted TDS on interest of payment of 3,35,23,91,732/- as reported by ACIT(TDS) vide letter dated F.No. ACIT(TDS)/2014-15/3426 dated 27.03.2015 order passed u/s 201(1), 201(1A) of Income Tax Act, 1961. The assessee is liable to deduct TDS on payment of interest u/s 194A of the I.T. Act, 1961, but he has failed to deduct TDS. Hence they are liable to be disallowed u/s 40(a)(ia).

(ii) Advertisement expenses of Rs. 2,00,95,431/- this year compared to Rs. 2,31,65,429/- last year. If the same was executed through contract, TDS is deductible u/s 194C of the I.T. Act, 1961. The same needs to be verified.

(iii) Consultancy Expenses of Rs. 3,33,33,898/- this year compared to Rs. 4,85,36,284/- last year. The same is liable for TDS u/s 194J of the I.T. Act, 1961 and needs to be verified.

(iv) The sundry creditors have decreased to Rs. 3933.63 Crores as compared to 2827.83 crores last year which needs verification.

(v) The assessee has claimed depreciation on electrical equipment @ 15% instead of 10% during the relevant previous year which is prima facie inadmissible."

A.Y. 2012-13

5. "On perusal of Income and Expenditure A/c and Balance sheet for A.Y. 2012-13 it is seen that the assessee has debited expenses totalling Rs. 3,20,21,98,370/- and shown income of Rs. 2,44,79,44,943/- only resulting in deficit of Rs. 75,42,53,427/- for the A.Y. 2012-13. On further examination the following issue emerges:-

6. (i) The Assessee has not deducted TDS on interest of payment of 3,80,12,68,874/- as reported by ACIT(TDS) vide letter dated F.No. ACIT(TDS)/2014-15/3426 dated 27.03.2015 order passed u/s 201(1), 201(1A) of Income Tax Act, 1961. The assessee is liable to deduct TDS on payment of interest u/s 194A of the I.T. Act, 1961, but he has failed to deducted TDS. Hence they are liable to be disallowed u/s 40(a)(ia).

(ii) Advertisement expenses of Rs. 2,39,35,369/- this year compared to Rs. 2,00,95,431/- last year. If the same was executed through contract, TDS is deductible u/s 194C of the I.T. Act, 1961. The same needs to be verified.

(iii) Consultancy Expenses of Rs. 4,76,91,925/- this year compared to Rs. 3,33,33,898/- last year. The same is liable for TDS u/s 194J of the I.T. Act, 1961 and needs to be verified.

(iv) The sundry creditors have decreased to Rs. 3617.41 Crores as compared to 3933.63 crores last year which needs verification.

(v) The assessee has claimed depreciation on electrical equipment @ 15% instead of 10% during the relevant previous year which is prima facie inadmissible."

A.Y. 2013-14

5. "On perusal of Income and Expenditure A/c and Balance sheet for A.Y. 2013-14 it is seen that the assessee has debited expenses totalling Rs. 2,28,24,31,417/- and shown income of Rs. 2,01,12,60,432/- only resulting in deficit of Rs. 27,11,70,984/- for the A.Y. 2013-14. On further examination the following issue emerges:-

(i) The Assessee has not deducted TDS on interest of payment of 2,22,43,16,262/- as reported by ACIT(TDS) vide letter dated F.No. ACIT(TDS)/2014-15/3426 dated 27.03.2015 order passed u/s 201(1), 201(1A) of Income Tax Act, 1961. The assessee is liable to deduct TDS on payment of interest u/s 194A of the I.T. Act, 1961, but he has failed to deducted TDS. Hence they are liable to be disallowed u/s 40(a)(ia).

(ii) Advertisement expenses of Rs. 2,97,94,287/- this year compared to Rs. 2,39,35,369/- last year. If the same was executed through contract, TDS is deductible u/s 194C of the I.T. Act, 1961. If no TDS was deducted and paid the expenses are liable to be disallowed 40(a)(ia). The same needs to be verified.

(iii) Consultancy Expenses of Rs. 6,09,04,803/- this year compared to Rs. 4,76,91,925/- last year. The same is liable for TDS u/s 194J of the I.T. Act, 1961 and needs to be verified.

(iv) The sundry creditors have decreased to Rs. 3800.58 Crores as compared to 3617.41 crores last year which needs verification.

(v) The assessee has claimed depreciation on electrical equipment @ 15% instead of 10% during the relevant previous year which is prima facie inadmissible."

11. In respect to A.Y. 2009-10, YEIDA received the document dated 15.03.2016 along with letter dated 16.05.2016 issued by DCIT containing reasons for initiating proceedings under Section 148 of Act 1961 and para 5 thereof reads as under:-

A.Y. 2009-10

5. "On examination of Balance Sheet and Income and Expenditure A/c for A.Y. 2009-10, the following issues emerge:

(i) "On perusal of Income and Expenditure A/c for A.Y. 2009-10 it is seen that the assessee has declared Rs. 1,57,36,299/- as expenditure over income for the relevant previous year.

(ii) Advertisement expenses of Rs. 1,47,64,131/- has been shown this year compared to Rs. 10,17,011/- last year. If the same was executed through contact, TDS is deductible u/s 194C of the I.T. Act, 1961. If no TDS was deducted and paid the expenses are liable to be disallowed u/s 40 (a) (ia).

(iii) Consultancy Expenses of Rs. 22,35,504/- this year compared to Rs. 2,17,45,061/- last year. The same is liable for TDS u/s 194J of the I.T. Act, 1961. If no TDS was deducted and paid the expenses are liable to be disallowed u/s 40 (a) (ia).

(iv) The sundry creditors have decreased to Rs. 798.77 Crores as compared to 2.02 crores last year.

(v) The assessee has claimed depreciation on electrical equipment @ 15% instead of 10% during the relevant previous year which is prima facie inadmissible."

12. YEIDA filed objection to the said notice dated 04.01.2016 in respect to all A.Y.''s except A.Y. 2009-10. The objection filed by YEIDA with respect to A.Y. 2009-10 is dated 21.06.2015. DCIT communicated orders dated 08.01.2016 in respect to A.Y.''s 2010-11, 2011-12, 2012-13, 2013-14 and rejected objections. In respect to A.Y. 2009-10 similar order has been passed on 10.08.2016 by Assistant Commissioner, Income Tax, Circle-3, NOIDA (hereinafter referred to as "ACIT").

13. In the order dated 08.01.2016, DCIT has considered two objections in detail namely, Assessee failed to deduct TDS under Section 194-A, 194C and 194J of Act 1961 and further that, Assessee if had understated income and claimed excessive loss, deduction, allowance or relief in the return, it shall be deemed to be a case of Escaped Assessment under Section 147 Explanation 2 (b). With regard to other objections, it has simply rejected the same stating as under:-

"where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return."

14. Order passed on 10.08.2016 is slightly in different terms and there ACIT who has passed the order, has taken a new ground and it said as under:-

"In this case, a search was conducted as some other assessee where certain documents of the assessee, were found and seized. The assessee has well acknowledged the papers (Page No. 4 & 5) of Annexure A-2 and offered the same for tax but now after attending many days of assessment proceedings filed objection on the basis that other pages are just estimation or not related to the assessee or explained in the Books of the Account of the assessee. As referred by the Hon''ble Supreme Court in the case of ACIT v. Rajesh Jhaveri Stock Broker Pvt. Ltd. If he has reason to believe that income for any assessment year has escaped assessment. The word "reason" in the phrase "reason to believe" would mean cause or justification. It the Assessing Officer has cause or justification to know or suppose that income had escaped assessment, it can be said to have reason to believe that an income had escaped assessment. The expression cannot be read to mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion."

In view of above, I hold that the AO was well within his rights to invoke the proviso to section 147 of the I.T. Act.

Likewise other objections relating to other reasons are rebutted as they lack assertion and logically futile. In light of above, the AO has sufficient reasons to believe that the income of the assessee has escaped assessment and therefore the jurisdiction assumed u/s 147 is legally and factually sound. With this the objections raised by the assessee are disposed off and it is directed to comply with the proceedings as per the due process of law."

15. The respondents have filed counter affidavit sworn by Sri Rajesh Kumar, DCIT, Circle-3, NOIDA. It is averred that Section 10 (20A) of Act 1961 has been omitted by Finance Act, 2002. Hence no exemption from Income Tax is now available to the category which was earlier covered by Section 10(20A). Now only, a ''''local authority'' under Section 10 (20) is exempted but YEIDA is not a local authority. The assessment proceedings for A.Y.''s 2005-06, 2006-07 and 2007-08 were completed on 11.03.2013, 03.03.2014, 27.03.2015, respectively. The exemption claimed by YEIDA under Section 10 (20) was denied. The appeal preferred by YEIDA against assessment order in regard to A.Y. 2005-06 has been dismissed on 21.03.2014. In regard to A.Y. 2012-13 assessment was also completed on 18.02.2016 which has been challenged in one of the connected writ petitions, up for consideration, being Writ (Tax) No. 237 of 2016.

16. Coming to other facts, respondents have said that YEIDA came into existence on 24.04.2001. Earlier it was existing with a different title namely "Taj Expressway Industrial Development Authority" which was changed as ''''YEIDA'' by notification dated 11.07.2008. The basic object of constitution of YEIDA is securing Infrastructure Development of industrial area of Yamuna Expressway Corridor. The functions of YEIDA included acquisition of land in the industrial development area, by agreement or through proceedings under Land Acquisition Act, 1894, prepare a plan for industrial development area, to demarcate and develop sites for institutional, industrial, commercial and residential purposes and according to plan, to provide infrastructure for institutional, industrial, commercial and residential purposes, to provide amenities, to allocate and transfer either by way of sale or lease or otherwise plots of land for industrial, commercial or residential purposes, to regulate the erection of buildings and setting up of industries and to lay down the purpose for which a particular site or plot of land shall be used namely for industrial or commercial or residential purpose, as the case may be. YEIDA is not a ''''local authority'', within the term Section 10(20) of Act 1961. This Court in Writ Petition no. 1338 of 2005, decided on 28.02.2011, negativing status of Local Authority claimed by New Okhla Industrial Development Authority (hereinafter referred to as "NOIDA''). Its review application has also been rejected by this Court. It is said that, though the judgment dated 28.02.2011 was in respect to NOIDA but status, nature of activities, nature of income etc. of NOIDA, YEIDA and Greater New Okhla Industrial Development Authority i.e. NOIDA are similar, hence whatever has been hold in the case of NOIDA shall hold good for YEIDA also.

17. Petitioner ought to have filed Return of Income within due date, as per Section 139(1) of Act 1961, but it failed. It is only in response to notice issued under Section 142(1) of Act 1961 on 07.08.2014, that Returns in respect to aforesaid Assessment Years were submitted by YEIDA. The Return Forms, however are virtually blank. Except name of petitioner, address, PAN and Assessment Year, almost everything has been left blank. Assessment proceedings under Section 147 of Act 1961, by issuing notice under Section 148 were initiated validly, after obtaining prior approval of competent authority as prescribed under Section 151 of Act 1961. Notices were issued after recording reasons. The objections filed petitioners have been rejected by a detailed order.

18. Sri Balbir Singh, learned counsel for petitioners, vehemently contended that there was no Escaped Assessment and there is total non application of mind on the part of competent authority in initiating reassessment proceedings. He urged that re-assessment is not permissible for change of opinion. Whatever material was available at the time of filing Return, there is no change and even otherwise impugned orders would apparently show total non application of mind on the part of concerned authority.

19. Sri Ashok Mehta, learned Additional Solicitor General, on the contrary, sought to support impugned orders rejecting objection of petitioner, and notices issued for re-assessment on the ground that Assessee was liable to deduct Tax/TDS under various provisions of Act 1961, as mentioned in the notices issued under Section 148 of Act 1961. The objections raised by YEIDA have also been considered in detail. Hence, under Article 226 of Constitution of India no interference is called for.

20. In all these writ petitions we are not concerned, as to whether YEIDA is amenable to income tax under Act 1961, or not or that an Assessment Order is correct, since that is an issue pending for consideration before concerned Revenue authorities. Our endeavour is confined to consider, whether objections raised by petitioner against re-assessment proceedings under Section 147/148 have been decided by application of mind or whether authorities concerned have recorded, in fact, "reasons to believe" for initiating re-assessment proceedings or not and the requirement of statute is justified, for the reasons that is a jurisdictional issue and not mere procedural one. So far as validity of assessment is concerned, petitioner admittedly has remedy elsewhere under the statute and neither we have been called upon to consider correctness of assessment nor we are otherwise inclined to look into that aspect. We are confined only to consider the question argued, that is, re-assessment proceedings under Section 147/148 of Act 1961 whether satisfy the conditions precedent for such initiation.

21. Now before examining the impugned orders passed by competent authority, as also "reasons to believe" for issuing notices under Section 148 of Act 1961, it would be appropriate to have a bird eye view of relevant authorities on the subject and statutory exposition of law on this aspect.

22. Section 147 gives power to Assessing Officer to assess or re-assess where it has "reason to believe" that any income chargeable to Tax has escaped assessment for any Assessment Year. This power of re-assessment however, is subject to provisions of Section 148 to 153. Section 147 and 148 reads as under:-

"Income escaping assessment.

147. If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year) :

Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of Section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year:

Provided further that nothing contained in the first proviso shall apply in a case where any income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment for any assessment year:

Provided also that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment.

Explanation 1. - Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso.

Explanation 2. - For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely :-

(a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax ;

(b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return

(ba) where the assessee has failed to furnish a report in respect of any international transaction which he was so required under section 92E;

(c) where an assessment has been made, but-

(i) income chargeable to tax has been under assessed ; or

(ii) such income has been assessed at too low a rate ; or

(iii) such income has been made the subject of excessive relief under this Act ; or

(iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed;

(d) where a person is found to have any asset (including financial interest in any entity) located outside India.

Explanation 3. - For the purpose of assessment or reassessment under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under sub-section (2) of section 148.]

Explanation 4. - For the removal of doubts, it is hereby clarified that the provisions of this section, as amended by the Finance Act, 2012, shall also be applicable for any assessment year beginning on or before the 1st day of April, 2012.

Issue of notice where income has escaped assessment.

148. [(1)] Before making the assessment, reassessment or recomputation under section 147, the Assessing Officer shall serve on the assessee a notice requiring him to furnish within such period, [* * *] as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139:

Provided that in a case-

(a) where a return has been furnished during the period commencing on the 1st day of October, 1991 and ending on the 30th day of September, 2005 in response to a notice served under this section, and

(b) subsequently a notice has been served under sub-section (2) of section 143 after the expiry of twelve months specified in the proviso to sub-section (2) of section 143, as it stood immediately before the amendment of said sub-section by the Finance Act, 2002 (20 of 2002) but before the expiry of the time limit for making the assessment, re-assessment or recomputation as specified in sub-section (2) of section 153, every such notice referred to in this clause shall be deemed to be a valid notice:

Provided further that in a case-

(a) where a return has been furnished during the period commencing on the 1st day of October, 1991 and ending on the 30th day of September, 2005, in response to a notice served under this section, and

(b) subsequently a notice has been served under clause (ii) of sub-section (2) of section 143 after the expiry of twelve months specified in the proviso to clause (ii) of sub-section (2) of section 143, but before the expiry of the time limit for making the assessment, reassessment or recomputation as specified in sub-section (2) of section 153, every such notice referred to in this clause shall be deemed to be a valid notice.]

Explanation. - For the removal of doubts, it is hereby declared that nothing contained in the first proviso or the second proviso shall apply to any return which has been furnished on or after the 1st day of October, 2005 in response to a notice served under this section.

(2) The Assessing Officer shall, before issuing any notice under this section, record his reasons for doing so."

23. In the context of old Income Tax Act i.e. Income Tax Act, 1922, Section 34 wherein dealt with situation of income escaping assessment, this issue as to when re-assessment proceedings can be initiated, came up before a Constitution Bench in Calcutta Discount Co. Ltd. v. Income-Tax Officer, Companies District I, Calcutta, and another, (1961) 41 ITR 191 (SC). The issue was decided by majority of 3/2. Court held, while it is duty of Assessee to disclose full and true, all primary relevant facts, the inference, to be drawn therefrom is the duty of Revenue. Assessee cannot be expected to assisst Revenue for deciding as to what inference on facts should reasonably be drawn or what inference ultimately be drawn. Thus, it would be a material bearing on the question of under-assessment and it would give a jurisdiction to Assessing Officer to issue notice under Section 34 for re-assessment. Whether grounds, are not adequate would not be examined by Court for the reason that non disclosure of material facts gives sufficient reason to confer jurisdiction. Similarly if Assessee intends to challenge a notice of re-assessment, he has to establish that Assessing Officer had no material at all before him to believe that there had been any non disclosure. The jurisdiction of re-assessment would be available to Assessing Officer only when he has "reason to believe" that income, profits or gains chargeable to income tax have been under assessed. It therefore, held that existence of material to form opinion of escaped assessment is a jurisdictional issue.

24. In the context of Act 1961, Section 147 came up for constitution in Ganga Saran & Sons P. Ltd v. Income Tax Officer & others, (1981) 130 ITR 1 (SC) and Court said;

"It is well settled as a result of several decisions of this Court that two distinct conditions must be satisfied before the Income Tax Officer can assume jurisdiction to issue notice under section 147 (a). First, he must have reason to believe that the income of the assessee has escaped assessment, and, secondly, he must have reason to believe that such escapement is by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. If either of these conditions is not fulfilled, the notice issued by the Income Tax Officer would be without jurisdiction. The important words under section 147 (a) are "has reason to believe" and these words are stronger than the words "is satisfied". The belief entertained by the Income Tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The Court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income Tax Officer in coming to the belief, but the Court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under section 147 (a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on facts and law could reasonably entertain the belief, the conclusion would be inescapable that the Income Tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to he struck down as invalid."

(emphasis added)

25. In Commissioner of Income Tax, Delhi v. Kelvinator of India Limited, (2010) 2 SCC 723, Court, referring to legislative intention for introducing condition of "reason to believe" said that it is not a power of review. There is a conceptual difference between power to review and power to re-assess. Assessing Officer has not power to review, he has power to re-assess. But re-assessment has to be based on fulfilment of certain pre-condition and if the concept of "change of opinion" is removed, then, in the garb of re-opening the assessment, review would take place. Court said that "change of opinion", if introduced in the context of Section 147, it would confer arbitrary powers upon Assessing Officer to review assessment at any stage and at any point of time. Court observed "one needs to give a schematic interpretation to the words "reason to believe" failing which, we are afraid, Section 147 would give arbitrary powers to the Assessing Officer to re-open assessments on the basis of "mere change of opinion", which cannot be per se reason to re-open." Thus in order to show that there was a reason to believe, an Assessing Officer must have a "tangible material'' to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of belief.

26. In Phool Chand Bajrang Lal And Anr. v. Income-Tax Officer, (1993) 4 SCC 77, referring to Section 147 and 148, Court said as under:-

"From the plain phraseology of the above Sections of the Act, it appears that two conditions precedent which are required to be satisfied before an Income Tax Officer can acquire jurisdiction to proceed under Clause (a) of Section 147 read with Sections 148 and 149 of the Act, beyond the period of four years but within a period of eight years, from the end of the relevant year, are: (a) that the Income Tax Officer must have reason to believe that the income, profits or gains chargeable to tax had either been under assessed or escaped assessment and (b) that the ITO must have reason to believe that such escapement or under-assessment was occasioned by reason, of omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. Both these conditions must co-exist in order to confer jurisdiction on the Income Tax Officer. The Income Tax Officer is obliged, before initiating proceedings under Section 148 of the Act to record the reasons for the formation of his belief to reopen the assessment."

(emphasis added)

27. Court further said that, an Income Tax Officer confers with jurisdiction to re-open assessment under Section 147 (a) read with Section 148 of Act 1961 only, if, on the basis of specific, reliable and relevant information, coming to his possession subsequently, he has reasons which he must record, to believe, that by reason of omission or failure on the part of the assessee to make a true and full disclosure of all material facts, necessary for his assessment, during the concluded assessment proceedings, any part of his income, profit or gains chargeable to income tax has escaped assessment. He may start reassessment proceedings either because some fresh facts come to light which were not previously disclosed or some information with regard to the facts previously disclosed comes into his possession which tends to expose untruthfulness of those facts. In such situations, it is not a case of mere change of opinion or the drawing of a different inference from the same facts as were earlier available but acting on fresh information. No doubt sufficiency of reasons for forming the belief, is not for the Court to judge, but it is open to an assessee to establish that there, in fact, existed no belief or that the belief was not at all a bona fide one or was based on vague, irrelevant and non-specific information. Only to that limited extent, Court may look into the conclusion arrived at by Income-tax Officer and examine whether there was any material available on the record from which the requisite belief could be formed by Income-tax Officer and further whether that material had any rational connection or a live link for the formation of requisite belief.

28. In Assistant Commissioner of Income Tax v. Rajesh Jhaveri Stock Brokers Pvt. Ltd., 2008 (14) SCC 208, Court said that the word "reason" in the phrase "reason to believe" would mean cause or justification. If Assessing Officer has cause or justification to know or suppose that income had escaped assessment, it can be said to have "reason to believe" that an income had escaped assessment. The expression cannot be read to mean that Assessing Officer should have finally ascertained the fact by legal evidence or conclusion. The function of Assessing Officer is to administer the statute with solicitude for the public exchequer with an inbuilt idea of fairness to taxpayers. Final outcome of the proceeding is not relevant. Only for the purpose of initiation stage, what is required is "reason to believe'', but not the established fact of escapement of income.

29. All these authorities have been considered and reiterated recently in State of Uttar Pradesh and others v. M/s Aryaverth Chawal Udyog & Others, 2016 (91) VST 1 (SC), Court after referring its earlier authorities, said that consistently it has been held that, such material on which Assessing Authority bases its opinion must not be arbitrary, irrational, vague, distant or irrelevant. It must bring home the appropriate rationale of action taken by Assessing Authority in pursuance of such belief. In case of absence of such material, Court in clear terms has held that the action taken by Assessing Authority on such "reason to believe" as arbitrary and bad in law. The standard of reason exercised by Assessing Authority is laid down as that of an honest and prudent person who would act on reasonable grounds and come to a cogent conclusion. The necessary sequitur is that a mere change of opinion while perusing the same material, cannot be a "reason to believe" that a case of escaped assessment exists requiring assessment proceedings to be reopened. If a conscious application of mind is made to the relevant facts and material available or existing at the relevant point of time while making assessment, and again a different or divergent view is reached, it would tantamount to "change of opinion". If an Assessing Authority forms an opinion during original assessment proceedings on the basis of material facts and subsequently finds it to be erroneous; it is not a valid reason under the law for reassessment. Thus, "reason to believe" cannot be said to be the subjective satisfaction of Assessing Authority but means an objective view on the disclosed information in the particular case and must be based on firm and concrete facts that some income has escaped assessment. In case of there being a change of opinion, there must necessarily be a nexus that requires to be established between "change of opinion" and the material present before Assessing Authority. Discovery of an inadvertent mistake or non-application of mind during assessment would not be a justified ground to re-initiate proceedings on the basis of change in subjective opinion.

30. Learned counsel for petitioner has also relied on certain judgments of this Court and other High Courts also which have been followed in similar line and exposition of law and we may only refer to those judgments i.e. Assistant Commissioner of Income Tax v. Greater Noida Industrial Development Authority (2015) 379 ITR 14 (All); Greater Noida Industrial Development Authority v. Commissioner of Income Tax (Writ Tax no. 985/2015-order dated 23.12.2015); Ishwar Chandra v. Union of India & others. (decided by Hon''ble Allahabad High Court on 04.02.2015); Indra Prastha Chemicals Pvt. Ltd. & others v. Commissioner of Income Tax & another (2004) 271 ITR 113 (All); Aroni Commercials Ltd. v. Deputy Commissioner of Income Tax & another (2014) 362 ITR 403 (Bom); Asian Paints Ltd. v. Deputy Commissioner of Income Tax & another (2008) 296 ITR 90 (Bom); Commissioner of Income Tax v. TCP Ltd. (2010) 323 ITR 346 (Mad);

31. In the light of above exposition of law, when we go through various reasons in respect to orders dated 08.01.2016, passed in all A.Ys. except 2009-10, we find that there is either a statement of fact as to what has been disclosed by YEIDA in Returns submitted by it and documents appended thereto or there is guesswork that either TDS was deductable and if not deducted, then there is default which has to be verified. This in itself shows that authority concerned has no subsequent material to form opinion but it is factual guesswork or conjectures on the part of authority concerned so as to include and make it part of reasons to justify re-assessment under Section 147/148 of Act 1961.

32. The reasons communicated to YEIDA, we have already quoted in respect to A.Y''s. 2010-11, 2011-12, 2012-13 and 2013-14. One of the ground is that Sundry Creditors have decreased and it needs verification. This is a fact disclosed by Assessee in the Returns and it was always open to the Assessing Officer to verify it at the stage of regular proceedings. If in the regular proceedings, Assessing Officer did not find any reason for verification what prompted it or made it obligatory to make verification now, is not clear and this ground in our view is nothing but change of process of opinion, not even a complete change of opinion, and cannot be justified to be a valid ground for reassessment unless there is something further to show that material was available before Assessing Authority so as to cause reason to believe that something has escaped assessment. The process of decrease of Sundry Creditors in the concerned A.Y. and previous year as mentioned by the Assessing Officer can be placed in the form of Chart as under:-

33. The non-application of mind of Assessing Officer is writ large from the fact that there is no consistent increase or decrease but it is in both ways. The Assessing Authority in the reasons, however, has consistently mentioned that Sundry Creditors have decreased and needs verification. When the difference is on both ways i.e. decrease and increase, mention of only one way i.e. decrease by Assessing Authority, not only shows non-application of mind but also shows that it is only conjecture and there is no material to constitute "reasons to believe".

34. There are three grounds relating to non-deduction of TDS:-

(a) TDS on interest of payment was not deducted under Section 194A and it was dis-allowable under Section 40(a), 1(a).

(b) Non-deduction of TDS under Section 194C on advertisement expenses.

(c) Non-deduction of TDS on consultancy expenses under Section 194J.

35. For all the aforesaid allegations of non-deduction of TDS, Assessing Authority after referring to the same has said that the matter requires verification with respect to deduction of TDS on interest payment it has also referred to an order passed by ACIT (TDS) under Sections 201(1) and 201(1)(a) of Act, 1961 on 27.03.2015.

36. Without looking into the question, whether Assessee was liable for deduction of TDS and deposit with Tax Authorities and whether he was liable to face consequences under Section 201 of Act, 1961 for failure to deduct or pay TDS, for us, it is sufficient to mention that Assessing Authority admits disclosure of various payments and expenses incurred by YEIDA on different heads i.e. payment of interest, advertisement and consultancy. These three expenses are disclosed in the documents filed along with return since this is evident from the reasons given by Assessing Authority that on the examination of Balance-sheet, Income and Expenditure Account these facts are evident. If that be so, every material was before the Authority concerned, nothing new has come, nothing has been discovered and nothing was detained by YEIDA and there is no non-disclosure of correct particulars.

37. Besides, there are several conditions under Section 194 A, 194 C and 194 J, and thereunder whether the TDS was actually deductable or not is a matter of investigation and enquiry. But it was always open to make this enquiry in regular proceedings when disclosure of payment under various heads as noted above was already there in the Income and Expenditure Account and Balance-sheet of YEIDA. But when Assessing Authority did not find any justification to make verification at that stage, for change of opinion now, in our view Sections 147/148 would not be attracted.

38. We also find that in respect to TDS, Assessing Authority has said that matter needs verification. We have already given a chart showing that petitioner claimed refund of TDS amount in Returns meaning thereby whatever TDS was deducted and deposited, it had claimed refund. It is nowhere stated that any information was concealed by YEIDA or has been wrongly disclosed or has not been disclosed at all. We also find from record that under Section 201, ACIT (TDS) already enquired from petitioner with respect to A.Y.''s 2011-12, 2012-13 and 2013-14, whether it has deducted tax on the amount of interest paid to NOIDA whereupon YEIDA admitted on oath that as per legal consultation they were advised that no deduction paid to YEIDA was required. Thereupon ACIT (TDS) held that such deduction was necessary and consequently passed order on 19.03.2015 raising demand of tax liability for A.Y.''s 2011-12, 2012-13, 2013-14, as under:-

39. If that be so, with regard to TDS, issue was already clear. We find that at the stage, when notices for re-assessment were issued, it cannot be said that there was anything which was not disclosed by Assessee or any subsequent fact or material had come to the notice of DCIT for justifying re-assessment.

40. Last reason/justification, that, YEIDA claimed depreciation on electrical equipment at the rate of 15% instead of 10%, which is prima facie inadmissible, is also unsustainable for the reason that it is a clear case of change of opinion. Assessee at the time of filing Return was not found incorrect but now a different opinion is being formed that depreciation should be lesser than that actually claimed.

41. In order dated 10.08.2016, height of non application of mind is evident from the fact that Assessing Authority while rejecting objection has observed that here is a case of seizure operation though admittedly there was no search and seizure matter. This clearly shows that while passing order dated 10.08.2016, competent authority did not care even to go through relevant record and apply its mind. When confronted, learned Additional Solicitor General has nothing to offer except his regret accepting that here is a clear case of non application of mind on the part of authority concerned.

42. In the entirety of facts and circumstances as discussed above, we are satisfied that the so called reasons mentioned by authority concerned, for all Assessment Years in question, for justifying re-assessment proceedings under Section 147/148 of Act 1961, are illegal, showing non application of mind and an arbitrary exercise on the part of authority concerned.

43. The writ petitions are allowed to the extent of notices issued by authority concerned under Section 148 and orders rejecting objection filed by petitioner against re-assessment under Section 147/148 of Act 1961, are hereby quashed. Petitioner shall be entitled to cost which we quantify Rs. 25,000/- in each set of case.

44. However, we make it clear that this judgment shall not preclude respondents from proceeding afresh in accordance with law for re-assessment, if it is so permissible for valid and just grounds as contemplated in law and relevant provisions.

45. We also make it clear that this judgment shall not effect in any manner the regular assessment already made and if the matter is pending at any other stage but any order of reassessment pursuant to the impugned notice which have been quashed by this judgment shall also stand quashed.